Insurers Lead Revival in IT Spending for 2011

June, 2011

Irvine, Calif.—The insurance sector is at the leading edge of an otherwise tentative recovery in IT operational sending this year, according to the newly released IT Spending and Staffing Benchmarks 2011/2012 study by Computer Economics, an IT research and advisory firm.

The study finds that median spending on IT operations is rising 5% in this sector, which is not only a substantial year-over-year improvement but also well above the median 2% growth for organizations across all sectors in the U.S. and Canada.

The wholesale distribution, discrete manufacturing, and high-tech sectors also have better-than-average improvements in IT operational spending, with median growth rates of 4.5%, 3.8%, and 3.5% respectively, the study finds.

To no surprise, the sector dragging the averages down is government. Median IT operational spending by governments is falling 3%, the second year in a row that IT organizations in the government sector have reduced spending. The retail and banking and finance sectors also continue to show below-average growth in median IT spending, at 1% and 1.1% respectively.

“We are seeing a recovery in both IT operational and capital spending after two years of zero growth, but the recovery is still weak and remains uneven from sector to sector,” said Frank Scavo, president of Computer Economics, Irvine, Calif. “The good news is that we are finally seeing new systems, upgrades, and infrastructure improvements back at the top of IT spending priorities.”

Sectors falling in the middle include healthcare providers (3.1%), process manufacturing (2.5%), energy and utilities (1.8%), and professional and technical services (1.7%).

Other key findings in the 2011 IT spending study include:

  • IT operational budgets as a percentage of revenue is 1.6% this year, down from 1.8% of revenue in 2010, as revenue gains outpace investment in IT.
  • In a continuation of a six-year trend, IT operational spending per user this year is declining to $6,667, down from $7,002 the prior year, on an inflation-adjusted basis. The long-term trend is indicative of improving IT operational efficiency but is being pushed further by the cost-cutting of the past three years.
  • After three years of zero growth, IT capital spending is up 1.8% at the median. Discrete manufacturing, energy and utilities, and high-tech sectors show the strongest growth in capital investment.
  • The modest increase in IT spending this year is not reflected in IT hiring plans: only 34% of organizations are increasing IT headcount, while 27% are reducing staff levels.

About the Study
The Computer Economics IT Spending and Staffing Benchmarks study, now in its 22nd year of publication, provides key metrics to assist organizations in the financial and strategic management of information technology. Each year, we conduct an in-depth survey of IT executives in the U.S. and Canada to gather detailed metrics concerning their IT spending and staffing levels, use of outsourcing, and adoption of IT management best practices. The respondents include executives in the public and private sectors. By repeating this survey each year, Computer Economics is in a unique position to identify long-term trends and understand the challenges of managing IT organizations.

The study is based on a survey of more than 200 IT executives conducted in the first quarter of 2011. It provides composite statistics of IT spending and staffing data, a segmentation of the same statistics by organization size, and individual chapters for 19 sectors and subsectors. A detailed description of the study’s content, design, demographics, and methodology can be found in the executive summary.